A cash-heavy balance sheet is often a sign of strength, but not always. Some companies avoid debt because they have weak business models, limited expansion opportunities, or inconsistent cash flow.

Just because a business has cash doesn’t mean it’s a good investment. Luckily, StockStory is here to help you separate the winners from the losers. That said, here are three companies with net cash positions to steer clear of and a few alternatives to consider.

Zillow (ZG)

Net Cash Position: $916 million (5.4% of Market Cap)

Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ: ZG) is the leading U.S. online real estate marketplace.

Why Do We Avoid ZG?

1. Products and services aren't resonating with the market as its revenue declined by 7.6% annually over the last five years
2. Suboptimal cost structure is highlighted by its history of operating margin losses
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Zillow’s stock price of $69.09 implies a valuation ratio of 36.8x forward P/E. To fully understand why you should be careful with ZG, check out our full research report (it’s free).

Manhattan Associates (MANH)

Net Cash Position: $158.9 million (1.4% of Market Cap)

Boasting major consumer staples and pharmaceutical companies as clients, Manhattan Associates (NASDAQ: MANH) offers a software-as-service platform that helps customers manage their supply chains.

Why Are We Out on MANH?

1. Offerings struggled to generate meaningful interest as its average billings growth of 3.6% over the last year did not impress
2. Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its three-year trend
3. Gross margin of 55.6% reflects its high servicing costs

At $192.78 per share, Manhattan Associates trades at 11.1x forward price-to-sales. If you’re considering MANH for your portfolio, see our FREE research report to learn more.

Yum China (YUMC)

Net Cash Position: $40 million (0.3% of Market Cap)

One of China’s largest restaurant companies, Yum China (NYSE: YUMC) is an independent entity spun off from Yum! Brands in 2016.

Why Does YUMC Worry Us?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5.4%
3. Challenging supply chain dynamics and bad unit economics are reflected in its low gross margin of 20.1%

Yum China is trading at $43.08 per share, or 15.7x forward P/E. Dive into our free research report to see why there are better opportunities than YUMC.

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.